Tuesday, November 22, 2016

Why do entrepreneurs from Tier 2 Indian cities have an inferiority complex ?

I gave a talk recently on angel investing at the Nashik Entrepreneurship Forum . I was very impressed with the turnout. There were over 300 people attending - and most of them were entrepreneurs and prospective entrepreneurs. It seems that becoming a startup founder is now a popular trend, and lots of students are seriously considering this option, which is great news.

The big problem is that many founders in these tier - 2 towns suffer from an inferiority complex   because they haven't graduated from an IIT or an IIM ; and they feel they are at a disadvantage because they are not based in the Indian startup hotspots such as Bangalore and Mumbai.  They compare themselves with the successful founders who are featured in the media, and find themselves lacking.

It's true that they don't speak English as fluently, and their presentation skills are not as polished as MBA grads.  However, I believe that entrepreneurs in these tier-two cities actually have an edge as compared to startups in Bangalore or Mumbai.

Now, this may seem counter-intuitive . Yes, the startup ecosystem in the larger cities is far better, but the founders in these smaller cities have  a far better chance of being able to create products successfully for the Indian consumer.  In one sense , a large city like Mumbai is very similar to any other  large city in the world, such as London or New York. Often founders in Mumbai live in their own little Westernised bubble, and have no sense of the pain points which the average Indian consumer living in villages or small towns has to face.  However, the founders who live in these small towns have to cope with the same problems which their customers have to tackle on a daily basis, which is why they are much more likely to come up with clever solutions.  They are much less likely to have competition, because founders in Mumbai aren't interested in solving the problems of consumers in Indian villages.

Given the fact that internet access has improved dramatically; and infrastructure has become so much better, they really don't have a competitive disadvantage as compared to founders in Mumbai .

They should be playing to their strengths , and they have a lot of strengths ! They can come up with solutions at a fraction of the cost, because real estate is so much cheaper in these towns. It's also much easier for them to find qualified employees, because all these places have lots of engineering colleges, and the competition to find talent is much less.  Their employees also charge much less, and are much more likely to stick with them, because their job options are far more limited than they would be in Mumbai.

I think one problem is the fact that we call these tier-two cities and tier-three cities. The name itself  suggests that they're second grade or second class , which means they are not as good as the tier-one cities.  This is ridiculous.

We should stop calling them tier-two cities, because  many founders from these towns will use this as an excuse for failure , saying, "Well, if we're tier-two, then obviously we're more likely to fail." Maybe we should call them cities of the future, because I think that's what they're going to be ! They are far more livable than Mumbai or Bangalore or Delhi are, and we are going to see lots of success stories from these places, as incubators and accelerators start seeding the entrepreneurial ecosystem in these towns.

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